Tesla about to be Included in the S&P 500. A Valuation

Dear Reader,

Tesla Inc., the electric vehicle manufacturer, is about to be included in the Standard and Poor's 500(S&P 500) index, the main stock market index in the USA and even globally. Tesla's current public market capitalization stands at 658.8 billion USD.

Is Tesla fairly valued? I believe Tesla is the biggest single stock bubble in history in terms of market overvaluation in USD terms. I estimate that Tesla's intrinsic value is around 90 billion USD. Green technology hype, retail investors' Tesla stock purchases and the cult towards Elon Musk's personality have blown the Tesla stock bubble out of all proportion.

Producing electric vehicles is simply too expensive with the current state of technology. Electric cars consume a lot of ferrous metals which are expensive and Tesla barely turns a profit, with some questionable accounting, by booking in advance future sales. Even established producers like Volkswagen, Toyota have profit margins of around 3-4 %, while luxury car brands as BMW and Mercedes hardly achieve net profit margins of more than 6-7%. If it wasn't for the government subsidies for electric vehicles, Tesla would have never turned a quarterly profit with the current state of technology.

What Tesla needs is a breakthrough in technology, which would allow it to produce electric vehicles profitably at scale. All the capital Tesla has raised from venture capital funds, stocks and bonds markets has only one goal - prolonging Tesla as a going concern until Tesla achieves a leap in technology which would allow it to become a profitable, viable business.

Yes, now the inclusion of Tesla in the S&P 500 would most likely increase Tesla's market capitalization and stock price even more as index trackers buy up the stock. But Tesla is grossly overvalued, as far as I am concerned.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich